Pear Therapeutics is one of the most notable companies in the field of digital therapy, and its demise could be an ominous sign for other industry players.
Dr Rishad Usmani, founder of Healthtech Investors, said: “I worry that it is a signal for the immediate future of digital therapy. Usmani has mentored and advised founders in the digital therapy industry on persuading physicians to adopt these tools.
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While most industry observers, including Usmani, are optimistic about the long-term potential of digital therapy, a growing number of people acknowledge that the business model needs to be improved. . There is also consensus that such improvements need to happen quickly as the challenges arise at a time when the digital health industry is already dealing with less friendly funding conditions.
Usmani said companies develop prescription digital therapies, software applications that must be prescribed by clinicians, sometimes mirroring the route pharmaceutical companies take for reimbursement. The problem, he said, is that biotech companies have more time to grow before they expect to generate revenue.
DarioHealth president Rick Anderson agrees with this assessment and says digital health companies are unlikely to go down this path.
“Biotech startups spend hundreds of millions of dollars to develop a product, and then if it succeeds, they essentially sell it to a pharmaceutical company for commercial use,” Anderson said. chemical. “There is a large elevator to go to the market.”
Pear Therapeutics, which has developed apps for opioid use and substance use disorders, is emblematic of this challenge. Last Friday, the Boston-based company filed for Chapter 11 bankruptcy protection and eliminated most of its workforce. In its bankruptcy filing, the company listed $65.6 million in assets and $51 million in liabilities.
The company, founded in 2013, has made strides that few other companies in the industry can match. Three of its prescription digital prescribing tools have been approved by the Food and Drug Administration. It was one of the first prescription digital therapy companies to get FDA approval and bring its products to market. According to founder and former CEO Corey McCann, its therapy is covered by 15 Blues carriers and many state Medicaid programs.
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However, Pear ran into financial difficulties. The company made just under $13 million in revenue in 2022 while suffering a loss of about $123 million.
In a LinkedIn post last Friday, McCann said the company failed because of payer disapproval and market conditions. McCann stepped down as CEO prior to the Chapter 11 filing but will serve as a paid consultant during the company’s dissolution. He did not respond to an interview request.
Andy Molnar, CEO of industry trade group Digital Therapeutics Alliance, said payer reimbursement is the biggest challenge his association’s companies face along with the financial environment. reduction aid. He said that Pear’s death worked.
“People are now getting the question, ‘Why aren’t you like Pear?’” Molnar said.
Arun Gupta, CEO of digital therapy company Big Health, said he doesn’t want to raise money right now. He said his company is well funded and has been diligent in reducing spending.
“Investors are apprehensive because they are losing money on one of the biggest platforms in the space,” Gupta said.
